April 27th, 2009

“Mortgage Rates Wandering, Spreads Improving”



According to the latest issue of HSH’s Market Trends Newsletter, “Mortgage Rates Wandering, Spreads Improving,” despite the fact that the yield on the 10-year Treasury is rising, mortgage rates have remained firm.

“Normally, those rising yields would be pressing mortgage rates higher — but these aren’t normal times. However, with the Fed fully involved in buying Treasuries, agency debt, and MBS, there’s little likelihood of any significant passthrough of rising rates, at least for conforming borrowers.”

“This week, the overall average for 30-year fixed-rate mortgages, gauged by HSH’s Fixed-Rate Mortgage Indicator, rose by three basis points to finish at 5.47%. The all-inclusive figure averages the prices of conforming, jumbo and expanded conforming products. Its 5/1 Hybrid ARM counterpart failed to move at all, standing for a second week at 5.19%. Conforming 30-year FRMs continue to flirt with either side of the 5% mark, and this week stood at 5.01% with 0.27 points. To get lower rates, those down in the upper 4% range, borrowers must pay higher fees, points or both.”

“As the risks of investing in mortgages came fully to the fore over the past couple of years, spreads — markups — over those ten-year Treasury yields widened appreciably and remain wide today. Those wider spreads are reflective of stress in a given market and also serve as a good measure of investor demand. The Fed has engineered low rates for conforming loans, and so the spread between these two instruments has been narrowed from nearly 3% (since the initial plan to buy mortgages was announced last November) to just about 2% today. Before the private credit markets began to break, the typical spread was perhaps 160 basis points (1.6%).”

Click here to continue reading “Mortgage Rates Wandering, Spreads Improving.” HSH’s free weekly Market Trends Newsletter, an in-depth analysis of various financial markets of the week prior, is published every Monday. Email subscribers receive it in your inbox by Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.

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About the HSH Blog's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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